Naughty Flicks

Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenuWhat a week to have a Monthly Meeting. On Thursday, Jim Cramer and portfolio director Jeff Marks held our October Monthly Meeting. They ran through our portfolio during this cloudy moment for the AI trade. Nevertheless, as Jim explained to start the meeting, we have faith “the sun will come out again.” Jim called out Goldman Sachs and Starbucks as his two favorite stocks to buy right now (we also bought Bank of New York before the meeting began). Note: Jim and Jeff didn’t have a chance to talk about Johnson & Johnson during the meeting, though our latest thinking on the healthcare giant is included below. Tech and AI stocks Apple : The iPhone maker is defying the AI sell-off and trading at all-time highs. That seems like an oddity, but remember it’s not spending tens of billions on data center capital expenditures. Preorders for the iPhone Duo begin Friday (and the foldable phone hits the shelves next week). We think this will be a big hit. Broadcom : This is a tough one, maybe the toughest. While we slashed the position in August ahead of earnings, its reliance on Anthropic and OpenAI as custom-chip customers makes us wish we had exited it altogether. As long as AI financing concerns are in question, Broadcom’s stock may struggle to rally, and we’re marking this one for sale. Intel : We’re steadfast that the chipmaker will be a winner in the AI era, thanks to both the renaissance in central processing units (CPUs) and the need for a manufacturing alternative to TSMC . But we’re holding off on buying more until the low $80s. It is difficult to buy more in this neighborhood when price-to-earnings multiples are compressing. Micron : Speaking of P/E valuations, one of our reasons for buying this memory-chip maker was a belief that steadier earnings in the AI cycle would be rewarded with a higher multiple. At this point, we still think the earnings will come through, and a voracious buyback looms in December. It’s just harder to count on that multiple expansion when the AI trade is on the ropes. Qnity : The DuPont spin-off that supplies materials used to make semiconductors remains an under-the-radar play on the AI boom. As Qnity gets discovered, we think it will be regarded as inexpensive versus its peers. This special-situation status keeps us invested. If you haven’t yet, check out our inside look at one of Qnity’s facilities outside Boston. The company gave us a rare, in-depth look at its operations. Eaton and GE Vernova : We’ve made excellent money in these two industrials levered to the data center buildout. Nevertheless, in this moment, we recognize the stocks could fall much lower if there is, in fact, debt problems among the data center builders. The counterbalance is both Eaton and GE Vernova stand to benefit from the electric grid overhaul that needs to happen, irrespective of AI. Alphabet : The Google parent needs to make its Gemini AI assistant more competitive versus Anthropic, OpenAI, and now Meta, but it is a stock we would look to buy more of as it goes down, not sell. The Google Cloud and YouTube businesses are just cash machines. Meta Platforms : The first of three hard-fought tech victories, Meta is back in Wall Street’s good graces thanks to the remarkably successful launch of its Muse personal agent app. Nobody has Muse in their earnings estimates, so the numbers are probably too low. While Meta may have to spend more on data centers to support Muse, we think it has a responsible approach. Microsoft : The second hard-fought winner, Microsoft was even tougher to hold than Meta. Yet it clawed its way back and on Tuesday notched its first record close in almost a year . The Street was convinced Microsoft had nothing to offer in the AI world. We trusted management to figure it out, and now Copilot has momentum and growth for its Azure cloud business is accelerating. Salesforce : Rounding out the trio of tech names we had to battle is Salesforce. Not only has CEO Marc Benioff built a compelling agentic AI offering with Agentforce, but he used the “SaaSpocalypse” panic to buy back a bunch of stock at much lower prices in March. The stock still looks cheap, trading at a mid-teens multiple on forward earnings estimates, which should help shares grind higher. CrowdStrike and Palo Alto Networks : Cybersecurity remains an important industry to have exposure to because companies need sturdy defenses to prevent agents from going rogue. At the same time, we recognize these stocks have had major moves and people are probably sitting on big profits. We’ve taken some off the table ourselves and can’t fault anyone for doing the same. Nvidia : While we understand some people may be concerned with all of Nvidia’s investments into other companies across the AI ecosystem, afraid of “circularity,” we still want to bank on CEO Jensen Huang. He has a crystal-clear vision of where the AI revolution is going. Still an “own it, don’t trade it” name. Amazon : If the e-commerce giant can demonstrate that its massive AI investments are starting to generate profits on its next earnings call while signaling that capital expenditure growth is beginning to moderate, expect shares to take off. We have tremendous confidence in CEO Andy Jassy and CFO Brian Olsavsky, and if we didn’t own any of the stock here, we would buy some. The financials Goldman Sachs : The investment bank delivered the strongest quarter of any financial company so far this earnings season, yet shares are still down big from their highs of the summer and trade at just 12 times earnings. We see that as an attractive buying opportunity. Goldman is also well positioned to capitalize on the market volatility fueled by higher interest rates, while an eventual end to the Iran war could unleash another wave of mergers and acquisitions and IPOs. Wells Fargo : Another imperfect quarter was frustrating, but that’s no reason to give up on a bank trading at just 11 times earnings and run by the incredibly smart Charlie Scharf. The CEO has been expanding Wells Fargo’s investment banking and credit card businesses, creating new opportunities for growth. Scharf also recently indicated that the bank stands to benefit from higher interest rates. BNY : No doubt our initiation in early September was poorly timed, but we still have tremendous faith in CEO Robin Vince. Earlier Thursday, the bank beat Wall Street expectations on both revenue and earnings. BNY’s numbers looked particularly good compared with rival State Street’s disappointing results a day earlier. We took advantage of the weakness to add to our position Thursday morning. Capital One : The credit-card issuer’s stock is very sensitive to the economy and gasoline prices, so that’s been a headwind and explains some of the underperformance. We understand the pain. But we still believe in the Discover acquisition being lucrative, and with shares trading at less than 10 times earnings, we’re holding on. The remaining names Linde : The industrial gas giant delivered a fine quarter in late July, supported by steady growth in its relatively defensive business (though healthcare was a blemish). We continue to like Linde’s ability to perform even when the broader industrial economy faces cyclical pressures. DuPont : The chemicals company delivered a terrific quarter in August considering challenges facing its clean-water business in the Middle East, but we’re keeping the stock on a short leash in the face of rate hikes and higher oil prices. Its exposure to the cyclical construction market remains a concern, and the breakup catalyst has largely played out. Need another reason to own the stock beyond the restructuring, like some M & A. Cardinal Health : Want a perfect stock for this nervous market? How about a drug distributor transforming into a higher-growth specialty healthcare provider? That’s Cardinal, which is why the stock has had such a big move this month. As much as we like the story, we don’t want to get greedy, so we trimmed our position Thursday morning at $251. We had bought 50 shares at $223 apiece on Sept. 30. Eli Lilly : Shares are jumping Thursday as part of the market’s rotation into defensive names. At current levels above $1,200, we’re closer to booking profits than we are adding to the position. Still, the company has the best obesity pipeline and the best scale. Oral obesity drug Foundayo is gaining ground on Novo Nordisk’s Wegovy pill. Johnson & Johnson : The stock has been benefiting from the same rotation as Lilly, though off the day’s highs. The biggest problem in its quarterly results Tuesday was the cardiovascular unit within its MedTech segment, though management insists the problems are fixable. While not ideal, we love the way its pharmaceutical business is performing and expect continued growth ahead. Costco : Although the warehouse retailer’s membership renewal rate had wobbled, particularly among younger shoppers who shop more online, its earnings report on Sept. 24 showed improvements. Still, at roughly 42 times earnings, the stock is about as expensive as we’re willing to tolerate in a rising rate environment. Further upside will need to come from earnings growth rather than multiple expansion. The good news is we’re confident Costco can deliver that. TJX Companies : The off-price retailer’s recent stumble may have reflected complacency after years of dominance, particularly as Ross Stores has become a tougher competitor under new CEO Jim Conroy. We’re optimistic that TJX is getting back on track . Shares have rallied sharply since we bought in late August and mid-September near their lows. Thanks to those well-timed buys, we’d look to take some profits at these levels if our trading restrictions allowed. Starbucks : CEO Brian Niccol’s turnaround is gaining momentum, and the coffee chain may be taking market share from competitors. Niccol personally assured us that Starbucks isn’t pursuing a Chipotle acquisition, and that the encouraging trends from its latest quarter are continuing. Stronger earnings can drive the stock higher without multiple expansion. Other than Goldman Sachs, Starbucks is the stock we’re most eager to buy. FedEx Freight : The less-than-truckload shipping company continues to struggle as elevated diesel prices weigh on shares. While we’re tempted by this pullback, we’re reluctant to increase our exposure to trucking stocks amid the uncertainty. We’ll look to J.B. Hunt’s earnings Thursday night for a better read on the broader freight market before making any moves. FedEx Corp : The shipping giant is one of the most undervalued stocks in the portfolio, as CEO Raj Subramaniam continues to improve efficiency and strengthen its competitive position. While we’re eager to buy more shares at these levels, we’re staying disciplined given the challenging market environment. Boeing : We’re sticking with the planemaker despite the stock’s recent weakness. CEO Kelly Ortberg continues to make progress, with Boeing recently averting a strike and securing a $20 billion defense contract. Regulators also determined that a software glitch reported in September did not pose a flight safety risk. Yet shares have continued to fall, largely because higher oil prices are weighing on aerospace stocks. Kimberly-Clark : The Huggies parent delivered some much-needed good news earlier Thursday, reporting preliminary third-quarter results ahead of expectations and reaffirming its full-year outlook. Chinese authorities also said no toxic substances were found in its products, disproving social-media claims that previously hurt sales . While its acquisition of Kenvue still needs approval in Brazil, we see this deal as a major catalyst, with Kimberly-Clark capable of getting more out of the Band-Aid and Tylenol parent than when it was part of Johnson & Johnson and as a standalone company. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.Read More